As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 4/01/05  Golden Nugget Inc                 10-K       12/31/04    6:4.3M                                   Merrill Corp-MD/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                       HTML   2.54M 
 2: EX-10.8     Material Contract                                   HTML     50K 
 3: EX-31.1     Certification per Sarbanes-Oxley Act (Section 302)  HTML     12K 
 4: EX-31.2     Certification per Sarbanes-Oxley Act (Section 302)  HTML     12K 
 5: EX-32.1     Certification per Sarbanes-Oxley Act (Section 906)  HTML      8K 
 6: EX-32.2     Certification per Sarbanes-Oxley Act (Section 906)  HTML      8K 

TABLE OF CONTENTS

				Page
		PART I
ITEM 1.		BUSINESS			1
ITEM 2.		PROPERTIES			11
ITEM 3.		LEGAL PROCEEDINGS			11
ITEM 4.		SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS			11
		PART II
ITEM 5.		MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES			12
ITEM 6.		SELECTED FINANCIAL DATA			13
ITEM 7.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			16
ITEM 7A.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			27
ITEM 8.		FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA			27
ITEM 9.		CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE			28
ITEM 9A.		CONTROLS AND PROCEDURES			28
		PART III
ITEM 10.		DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT			29
ITEM 11.		EXECUTIVE COMPENSATION			32
ITEM 12.		SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			35
ITEM 13.		CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS			37
ITEM 14.		PRINCIPAL ACCOUNTANT FEES AND SERVICES			38
		PART IV
ITEM 15.		EXHIBITS AND FINANCIAL STATEMENT SCHEDULES			39

 

PART I

ITEM 1.                BUSINESS

This Annual Report on Form 10-K contains forward-looking statements based on expectations, estimates and projections as of the date of this filing. Actual results may differ materially from those expressed in forward-looking statements. See Item 7 of Part II—“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Cautionary Statement Regarding Forward-Looking Statements.” As used herein, unless the context requires otherwise, the terms the “Company,” “we,” “us,” and “our” refer to Poster Financial Group, Inc. and its subsidiaries and the term “Poster Financial” refers only to Poster Financial Group, Inc. and not its subsidiaries.

General

We own and operate the Golden Nugget hotel-casinos in Las Vegas and Laughlin, Nevada, which we refer to as the Golden Nugget—Las Vegas and the Golden Nugget—Laughlin, respectively. The following table sets forth information about each of the Golden Nugget properties as of December 31, 2004:

Property				Slot Machines				Table Games				Casino Space (square feet)				Hotel Rooms
Golden Nugget—Las Vegas					1,315				56				35,000			1,907
Golden Nugget—Laughlin					984				21				32,000			300
Total					2,299				77				67,000			2,207

 

We believe that the Golden Nugget brand name is one of the most recognized in the gaming industry and we expect to continue to capitalize on the strong name recognition and high level of quality and value associated with it. With our long-standing commitment to quality and service, the Golden Nugget—Las Vegas has received the prestigious AAA Four Diamond Award, awarded by the American Automobile Association, a North American motoring and leisure travel organization, for 28 consecutive years. This award was given to approximately 1,100 of the approximately 55,000 eligible lodging establishments in the United States evaluated by the AAA in 2005. According to the AAA, establishments that receive the AAA Four Diamond Award are upscale in all areas and offer an extensive array of amenities and a high degree of hospitality, service and attention to detail.

We target out-of-town customers at both of our properties while also catering to the local customer base. We believe that the Golden Nugget—Las Vegas is the leading downtown destination for out-of-town customers. The property offers the same complement of services as our Las Vegas Strip competitors, but we believe that our customers prefer the boutique experience we offer and the downtown environment. We emphasize the property’s wide selection of amenities and provide a luxury room product and personalized services at an attractive value. We have also increased our use of table and slot hosts to provide more personalized customer service and to attract higher-end players to the property. At the Golden Nugget—Laughlin, we focus on providing a high level of customer service, a quality dining experience at an appealing value, a slot product with highly competitive pay tables and a superior player rewards program.

Poster Financial is a holding company that was incorporated in Nevada in June 2003 for the purpose of acquiring the entities that own and operate the Golden Nugget properties. Poster Financial is a wholly owned subsidiary of PB Gaming, Inc. (“PB Gaming”). Timothy N. Poster, our Chairman and Chief Executive Officer, and Thomas C. Breitling, our President, Secretary and Treasuer and one of our directors, each own 50% of the issued and outstanding stock of PB Gaming. See Item 12 of Part III—“Security Ownership of Certain Beneficial Owners and Management.” We acquired GNLV, CORP. (“GNLV’) and GNL, CORP. (“GNL”), the entities which own and operate the Golden Nugget—Las

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Vegas and the Golden Nugget—Laughlin, respectively, from MGM MIRAGE on January 23, 2004 (the “Acquisition”). GNLV and its subsidiaries and GNL are collectively referred to in this Annual Report on Form 10-K as the “Golden Nugget Group.”

Our principal executive offices are located at 129 E. Fremont Street. Las Vegas, Nevada 89101 and our telephone number is (702) 385-7111. The website addresses of the Golden Nugget—Las Vegas and the Golden Nugget—Laughlin are www.goldennugget.com and www.gnlaughlin.com, respectively. Our investor relations website is www.goldennugget.com/home/press_room/investor_relations/, which includes financial and other information for investors, including free of charge access to our filings with the SEC through a link to the SEC’s EDGAR database. Through that link, our filings with the SEC are made available as soon as reasonably practicable after we make such filings.

Recent Developments

Sale of Poster Financial

On February 4, 2005, PB Gaming entered into an agreement (the “Landry’s Purchase Agreement”) to sell Poster Financial to Houston, Texas-based Landry’s Restaurants, Inc. (“Landry’s”) for approximately $140 million in cash, and an additional payment by Landry’s for certain working capital liabilities. Under the terms of the Landry’s Purchase Agreement, PB Gaming has agreed to sell all of the shares of Poster Financial to LSRI Holdings, Inc. (“LSRI”), a wholly owned subsidiary of Landry’s.

Pursuant to the terms of the Landry’s Purchase Agreement, LSRI deposited $25,000,000 into an escrow account with Chicago Title of Nevada, Inc., the escrow agent, as a non-refundable deposit, except as otherwise expressly provided in the purchase agreement. LSRI may terminate the Landry’s Purchase Agreement for any reason or no reason in its sole and absolute discretion.

Under the terms of the Landry’s Purchase Agreement, Poster Financial’s currently outstanding 8¾% Senior Secured Notes due 2011 (the “Senior Notes”) will remain outstanding obligations of Poster Financial following the closing. The consummation of the sale will result in a change of control of Poster Financial under the indenture governing the Senior Notes and, as a result, Poster Financial will be required within 30 days of such change of control to commence an offer to purchase all outstanding Senior Notes for 101% of the aggregate principal amount of the Senior Notes, plus any accrued and unpaid interest. Under the terms of the Landry’s Purchase Agreement, amounts outstanding at closing under our senior secured credit facility (the “Credit Facility”) will be paid off by Landry’s or Landry’s will seek consent from the lender under such facility for such amounts to remain outstanding.

It is anticipated that the transaction will close within the next twelve months, subject to customary closing conditions contained in the purchase agreement, including receipt of all necessary governmental, gaming and other regulatory approvals.

Sale of Golden Nugget—Laughlin

On November 8, 2004, Poster Financial entered into a stock purchase agreement to sell the Golden Nugget—Laughlin to Las Vegas-based gaming and real estate company, Barrick Gaming Corporation for $31 million, plus working capital at the closing of the transaction. The transaction includes a 24-month license agreement for the limited use of the Golden Nugget—Laughlin name and brand.

The transaction is subject to customary closing conditions contained in the stock purchase agreement, including receipt of all necessary regulatory and governmental approvals. Both parties anticipate the transaction to be completed during the second quarter of 2005.

On March 24, 2005, in connection with the sale of the Golden Nugget—Laughlin, GNL sold a motel formerly used by the Golden Nugget—Laughlin to an unrelated third party. The motel is located in

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Bullhead City, Arizona and occupies approximately two acres of land. Net proceeds from the sale were approximately $1.1 million and were used to pay down debt outstanding under the Credit Facility.

Golden Nugget—Las Vegas

Overview

The Golden Nugget—Las Vegas opened as a gambling hall in 1946 and is the largest, by number of guestrooms and suites, and, we believe, the most luxurious, hotel-casino in downtown Las Vegas. The Golden Nugget—Las Vegas has 1,907 guest rooms, all of which were completely renovated over the past two years. The property, together with its two stand-alone parking facilities comprised of over 1,000 parking spaces, occupies approximately seven and one-half acres. The Golden Nugget—Las Vegas has approximately 35,000 square feet of casino space containing approximately 1,315 slot machines, 56 table games and a race and sports book. The casino’s slot machines include Wheel of Fortune®, Elvis®, Jeopardy® and MegaBucks®, and its table games include Blackjack, Craps, Mini Baccarat, Roulette, Pai Gow Poker, Let it Ride and Caribbean Stud Poker. The casino also offers video poker, keno and Big 6. Customers are offered membership in the 24 Karat Club, which rewards active club members with cash back bonuses and invitations to gaming tournaments and special events. Club members can also earn complimentary certificates for use as cash towards room charges or purchases in the properties’ restaurants, gift shops, spa, or beauty salon. Club members can also receive special room rates and may make reservations through the toll free 24 Karat Club information line.

The Golden Nugget—Las Vegas has five award-winning restaurants, spa and salon facilities, a 400-seat showroom, an entertainment lounge and an outdoor pool. The property also has approximately 29,000 square feet of meeting and banquet space, including 12 meeting rooms ranging in size from 510 to 6,400 square feet, the largest of which can accommodate up to 500 guests. The facilities offer special events catering, state-of-the-art audio visual services and a business center providing business and communication services to the hotel’s guests. The property has benefited from The Fremont Street Experience, an entertainment and special events venue that opened in December 1995, and from a series of capital improvements to the property completed in 2001 and 2002. Our goal at the Golden Nugget—Las Vegas is to maintain the property’s position as the leading downtown destination for out-of-town customers. Customer satisfaction and loyalty are critical components of our strategy. We work to create the best possible gaming and entertainment experience for our customers by providing comfortable and attractive surroundings with attentive service from friendly and experienced employees. In addition, we emphasize the property’s wide selection of amenities, including its high-quality room and suite products, spa, salon, pool, meeting and banquet facilities, special events and entertainment and fine dining. By providing a luxury room product and services at an appealing value to customers, we expect to continue to maintain our competitive advantages, generate increased customer visits and maintain room occupancy rates above industry averages. We intend to continue to leverage the more than 25,000 daily visitors to The Fremont Street Experience by attracting them to our property and retaining them as customers.

Business Strategy

Emphasize Slot Play and our Rewards Program to Drive Growth in Slot Revenue.   Slots have been the most consistently profitable division of the Golden Nugget—Las Vegas. We have and will continue to emphasize slot play by consistently offering the newest games and equipment and our rewards program to drive growth in our slot revenues, including by continuing to employ creative slot marketing strategies. Our 24 Karat Club was the first-ever frequent slot player rewards program, and we will continue to promote membership in the 24 Karat Club. In addition, we plan to increase the slot tournament schedule, which has proven successful by generating incremental visits by rated players, and expand special events for our slot players to help attract incremental visits. We also extend ticket offers to events such as headline

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entertainment concerts, both in our venues and city-wide, and offer tickets to shopping, dining and spectator and participatory sporting events to attract rated slot players to the property.

Incorporate Ticket-in/Ticket-out Technology to Improve Customer Satisfaction and Operational Efficiencies.   During June 2004 we began to incorporate “ticket-in/ticket-out” technology into our slot machines. The “ticket-in/ticket-out” system replaces traditional coin payouts by allowing slot patrons to receive printed tickets instead of coins from the machine. This technology has improved our operational efficiency by affording us a less expensive way to service our customers by eliminating some of the labor required to count, sort, package and distribute heavy coins and tokens and by reducing the down time of our slot machines. At year end approximately 77% of our slot machines had been converted to “ticket-in/ticket-out” technology, with the remainder scheduled to be converted in the first half of 2005.

Enhance Table Game Operations.   We market our table game operations through special events, such as card tournaments and golf and sports-related outings, and by providing preferred seating at high profile headline entertainment events to increase incremental visits by qualified table players to the property. Increased direct mail, telemarketing and personal contact with customers is also a part of our plan to improve the property’s table play revenue.

Utilize Internet Distribution Channels to Sell Hotel Inventory.   In 2004, the Golden Nugget—Las Vegas was very successful in shifting a greater percentage of hotel room sales to Internet distribution channels. Although room rate contracts for 2004 with primary wholesale tour operators had already been negotiated and confirmed based on MGM Mirage pricing strategies and their corporate-wide customer relationships prior to Poster Financial taking control of the business cycle, we were able to expand the on-line customer base and maneuver inventories into channels that provided us with better controls of average daily rate (ADR) yield management. At year end, we were able to realize an incremental rooms revenue growth of approximately $5 million, acquired at a direct cost savings of almost $2 million less than in 2003. Through this effort, the Golden Nugget—Las Vegas was able to increase the percentage of rooms sold in the wholesale segment through extranet controlled ADR yield management systems to 65%, from 30% in the prior year.

Golden Nugget—Laughlin

Overview

The Golden Nugget—Laughlin, which originally opened in 1968, is located on approximately 13 acres with 600 feet of Colorado River frontage near the center of the tourist strip in Laughlin, Nevada, 90 miles south of Las Vegas. The Golden Nugget—Laughlin features a tropical theme, including a 30-foot high, glass topped atrium and features a tropical rainforest complete with 20-foot palms, two cascading waterfalls and approximately 300 different types of flora. The Golden Nugget—Laughlin has approximately 32,000 square feet of casino space containing over 1,000 slot machines and 12 table games. Slot machines, blackjack, craps, roulette, three card poker, video poker, slot machines, keno and a race and sports book are all available 24 hours a day. Customers are offered membership in the 24 Karat Club, which rewards active club members with cash back bonuses, merchandise and casino services. Club members are eligible for special promotions, slot tournaments, 24 Karat Club drawings and special discounts. The hotel has 300 tropically themed guest rooms, and, in addition to its casino and hotel facilities, the Golden Nugget—Laughlin features five dining options, a variety of bars and retail shops, a nightclub, a Swenson’s Ice Cream Shop and a Starbucks store. Other amenities at the Golden Nugget—Laughlin include a swimming pool, a parking garage with over 1,390 spaces, and approximately four and one-half acres of recreational vehicle surface parking, which can be used for future commercial development.

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Business Strategy

Our strategy at the Golden Nugget—Laughlin is to provide a high level of customer service, an attractive property, a quality dining experience at an appealing value, a slot product with highly competitive pay tables and a superior player rewards program. The property’s intimate size facilitates contact with players by property management, including the most senior levels. We focus on making our dining options a point of differentiation for the property; our new waterfront restaurant, The Lobster Bar at The Deck, is currently the only indoor/outdoor dining option on the Colorado River in Laughlin.

In March 2004, the Golden Nugget—Laughlin completed a $200,000 renovation of The Sports Bar at Tarzan’s, a sports bar and dining option, which includes 26 unique viewing environments and a full-service sports book. Additionally, in the second quarter of 2004, the Golden Nugget—Laughlin reopened the Buffet. We intend to continue to maintain quality service and product offerings consistent with the reputation of the Golden Nugget brand which, combined with an active events calendar, we expect will keep high-value guests returning and will introduce new guests to the property.

Emphasize Slot Play, Upgrade our Slot Management System.   We offer highly personalized guest service at the Golden Nugget—Laughlin that focuses on slot play, which generates approximately 63.5% of our gross revenues. We have and will continue to use new machines with popular games to attract and retain gaming patrons, including multi-denominational machines that allow a customer to choose the denomination to be wagered and that provide customers with the ability to tailor their gaming experience to their preferences.

We upgraded the property’s slot and table game player tracking system in the third quarter of 2004 to mirror the operating platform that is installed at the Golden Nugget—Las Vegas. The new operating system allows further expansion of the property’s “ticket-in/ticket-out” environment, reaching 28% of the floor in the fourth quarter of 2004. In the future, the system will allow for additional marketing features such as rewarding slot players with non-negotiable, free play credits (expected to be available in second quarter of 2005), which is both attractive to the player and cost effective to the business when compared with current cash back rewards programs. The “ticket-in/ticket-out” system has proven to increase opportunities for promotional programs, operational efficiencies and improved guest satisfaction at the property. These benefits of the system have been seen in 2004 and we plan in the future to continue increasing the “ticket-in/ticket-out” environment on the property.

Utilize Internet Distribution Channels and Focused Marketing Strategies to Grow the Business.   Our growth strategy for the Golden Nugget—Laughlin hotel division has been and continues to be to broaden the sales and distribution channels and to utilize wholesale room selling to increase occupancy and average daily rates. In addition, we plan to use Internet campaigns to increase awareness of the destination and the property and to market “air and room” packages to the Golden Nugget—Laughlin both online and to wholesalers, attracting a guest from within and beyond the traditional feeder markets of California and Arizona with a greater potential revenue per visit. The property has more than doubled its total online reservations in 2004 over 2003.

Our popular 24 Karat Club rewards program, which rewards players with complimentaries and cash back bonuses for their play, has grown daily membership enrollments by as much as 100% over 2002. Our players club members can redeem their complimentaries towards room charges or purchases in our restaurants and bars. We believe that the customer loyalty generated by the 24 Karat Club and the Golden Nugget brand provides us with a significant competitive advantage in attracting customers to our property.

The Golden Nugget—Laughlin has developed and maintains a player database of approximately 289,000 customers. The property has equal representation of out-of-town and local customers in its database, many of whom are long-term customers. These customers form a strong, regular customer base on which we will continue to focus our marketing efforts. We have and will continue to employ a direct

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mail program to target our database customers with a variety of product offerings, including incentives to visit our property frequently.

Capitalize on Expanded Air Services to Laughlin.   Air service to the Laughlin market has expanded in recent years with passenger counts at the Laughlin/Bullhead Airport increasing 21.2% in total passengers for the twelve-month period ending December 31, 2004 over the previous year. We have and will continue to work to capitalize on the regularly scheduled charter flight services from across the United States and Canada to the Laughlin market. We have and will continue to utilize wholesale and Internet distribution systems along with conventional direct marketing and advertising to attract the fly and stay visitors and expand our visitor base beyond our primary feeder markets of California and Arizona. We also intend to utilize these channels to increase visits from guests with a potentially higher spend per visit.

Upgrade Hotel Management System.   We upgraded the hotel management system at the property in the fourth quarter of 2003, including better reporting functions that aid in yield management. This technology and implementation of yield management improves our capability to maximize average daily rate (ADR) and revenue per available room (RevPAR) by, for example, enabling us to analyze historical rate structures, evaluate occupancy and rate trend data and exploit opportunities to maximize occupancy and rate based on such information. This system also gives greater potential for integration with online reservation systems. We have been and should continue to be able to see the effects of the system and yield management techniques with a 5% increase in the revenues of the hotel division in the twelve-month period ending December 31, 2004 over 2003.

Seasonality

The Golden Nugget properties operate 24 hours each day, every day of the year. Historically, the financial performance and revenues of the Golden Nugget properties are higher during the first and second quarters of each year. At the Golden Nugget—Laughlin, this effect is largely attributable to an influx of seasonal residents to the region from January to March and, to a lesser extent, during October, November, December and April, due to Nevada’s favorable climate through the fall and winter months. At the Golden Nugget—Las Vegas, this effect is primarily due to general seasonal travel trends, with less customers visiting Las Vegas during the summer months. Accordingly, our results of operations are expected to fluctuate from quarter to quarter, and the results for any fiscal quarter may not be indicative of results for future fiscal quarters.

Marketing

We intend to continue to build on the solid visitor base of the Golden Nugget properties by concentrating on reaching out to our rated players, and other mid- to high-level table game and slot customers, through unique and focused marketing. Our marketing strategy for the Golden Nugget—Las Vegas is focused on attracting mid- to high-level gaming customers through special events, gaming tournaments and other entertainment and leisure-time offerings. With a large daily base of tour and travel customers occupying hotel rooms, we seek to convert them into repeat gaming customers by enticing them with the benefits of our 24 Karat Club. Golden Nugget—Laughlin appeals primarily to middle-income customers attracted by room, food and beverage offerings that are priced more attractively than those offered by the major Las Vegas hotel-casinos.

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We intend to elevate the profile of the Golden Nugget brand and increase our gaming volume. For example, we promote slot machine play by providing the newest equipment and the best service. We also intend to capitalize on higher-end play by appealing to customers that have historically frequented properties on the Las Vegas Strip. To further promote the gaming focus of the Golden Nugget properties, our table and slot hosts will increase their direct customer solicitation activities, as well as provide a more personalized customer experience upon arrival at the property. We primarily target customers in southern California, however, the Golden Nugget—Las Vegas will also increase targeted marketing to customers in Hawaii, as well as customers in the local Las Vegas market. In addition, we will continue to utilize the services of wholesale vacation distributors in order to market our facilities in key domestic source markets, such as Dallas, Houston, San Antonio, Milwaukee and Minneapolis, as well as market our facilities through Internet distribution channels. We utilize personal contact by our marketing personnel, a key element of marketing to high-end customers. The Golden Nugget properties also maintain their own Web sites, which inform customers about the properties and enable them to reserve hotel rooms, purchase show tickets and make restaurant reservations. Direct marketing is also important in the convention, corporate meeting and group travel segments, and we continue to utilize it to attract guests during certain periods and to introduce new customers to the Golden Nugget properties.

Members of our management team have extensive experience in the hotel reservations and marketing industries, particularly in the Las Vegas and Laughlin markets. Travelscape.com, and its precursor, Las Vegas Reservation Systems, wholesale hotel-room selling companies that were founded by members of our senior management, were largely focused on the Las Vegas travel market. We have utilized the expertise in hospitality-focused technologies, and travel industry connections, of our senior management to gain efficiencies in the distribution of our hotel inventories and to help facilitate more creative, efficient and targeted marketing campaigns to attract more profitable gaming customers to our properties.

Competition

The Golden Nugget—Las Vegas currently competes with numerous major hotel-casinos and a number of smaller casinos located on or near the Las Vegas Strip. The Golden Nugget—Las Vegas also competes with casinos located in downtown Las Vegas, which is about five miles from the center of the Strip, with casinos in Las Vegas’ suburban areas and, to a lesser extent, with casino and hotel properties in other parts of Nevada, including Laughlin, Reno and along I-15 (the principal highway between Las Vegas and southern California) near the California-Nevada state line. In particular, the downtown Las Vegas gaming market consists of 14 hotel-casinos. Las Vegas casinos, including the Golden Nugget—Las Vegas, also compete with Native American casinos in southern California (the principal source of business for Las Vegas casinos) and central Arizona and, to a lesser extent, with casinos in other parts of the country. According to the Las Vegas Convention and Visitors Authority, there were 131,503 guestrooms in Las Vegas at December 31, 2004, a slight increase compared to December 31, 2003. Las Vegas visitor volume was 37.4 million in 2004, an increase of 5.4% from the 35.5 million reported for 2003. Additional new hotel-casinos, and expansion projects at existing Las Vegas hotel-casinos, are under construction or have been proposed. We are unable to determine to what extent increased competition will affect the future operating results of the Golden Nugget—Las Vegas.

The Golden Nugget—Laughlin currently competes with nine hotel-casinos in Laughlin. It also competes with the Native American hotel-casino located approximately 14 miles from the Golden Nugget—Laughlin, a growing number of Native American casinos in the regional market and the primary feeder markets of California and Arizona, and with hotel-casinos in Las Vegas, Jean and Primm, Nevada. The expansion of hotel and casino capacity in Las Vegas in recent years and the growth of Native American casinos in central Arizona and southern California have had a negative impact on Laughlin area properties, including the Golden Nugget—Laughlin, by drawing visitors from the Laughlin market. This has, in turn, resulted in increased competition among Laughlin properties for a reduced number of visitors,

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which weakens pricing power and contributes to generally lower revenues and profit margins at Laughlin properties, including the Golden Nugget—Laughlin. There is a large influx of new residents and residential developments within the Laughlin market area, this development has and will continue to grow the local residential population. This residential growth no doubt contributed to the 7.7% growth in gaming revenue for the eleven months ending November 2004 as overall visitor volume declined 3.4% over the same period.

We believe that the legalization of large-scale land-based casino gaming in or near certain major metropolitan areas, particularly in California, could have a material adverse effect on the Las Vegas and Laughlin markets. On March 7, 2000, voters in California approved an amendment to the California constitution that gave Native American tribes in California the right to offer a limited number of slot machines and a range of house-banked card games. A number of Native American tribes have already signed, and others have begun, gaming compacts with the State of California. More than 60 compacts had been approved by the federal government as of June 30, 2003, and casino-style gaming is legal in California on those tribal lands. According to the California Gambling Control Commission, there were more than 50 operating tribal casinos in California at June 30, 2003.

We also compete for gaming customers with hotel-casino operations located in other areas of the United States and other parts of the world, and for vacationers with non-gaming tourist destinations such as Hawaii and Florida. To a lesser extent, we also compete, and will in the future compete, with all forms of legalized gambling. Gaming has expanded dramatically in the United States in recent years. Forms of gaming include: riverboats, dockside gaming facilities, Native American gaming ventures, land-based casinos, state-sponsored lotteries, racetracks, including slot machines at racetracks, off-track wagering, Internet gaming and card parlors. These ventures could divert customers from the Golden Nugget properties and thus adversely affect our business, financial condition and results of operations. We also face competition from all other types of entertainment.

The competitive advantages of the Golden Nugget properties include the strong recognition and high level of quality associated with the “Golden Nugget” brand, the long-standing guest relationships at each property, the high-quality guest rooms and dining and entertainment facilities, the length of experience of the senior management teams at the Golden Nugget properties and the comprehensive marketing and promotion programs our properties tailor to their targeted customers. We also recruit, train and retain well-qualified and motivated employees who provide superior and friendly customer service to our guests.

Employees

As of December 31, 2004, the GNLV had approximately 2,564 full-time and 373 part-time employees, and GNL had approximately 749 full-time and 21 part-time employees. At that date, the GNLV had collective bargaining contracts with three unions covering approximately 1,482 of its employees, and GNL did not have collective bargaining contracts with any unions. GNLV’s collective bargaining agreements with the culinary, carpenters and painters unions are due to expire on May 31, 2007, July 31, 2006 and September 7, 2005, respectively. We consider our employee relations to be good.

Environmental and Health and Safety Matters

We are subject to a variety of federal, state and local environmental and health and public safety, laws and regulations, including those governing the discharge of pollutants into the air or water, the management and disposal of hazardous substances or wastes and the cleanup of contaminated sites. Some of our operations require environmental permits and controls to prevent and reduce air and water pollution, and these permits are subject to modification, renewal and revocation by issuing authorities. We are also subject to the U.S. Occupational Health and Safety Act and similar state and local laws. We believe that we are in substantial compliance with all applicable material laws and regulations in the

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United States. Historically, our costs of achieving and maintaining compliance with environmental and health and public safety requirements have not been material to our operations.

Regulation and Licensing

Introduction

The ownership and operation of casino gaming facilities in the State of Nevada are subject to the Nevada Gaming Control Act and the regulations made under such Act, as well as various local ordinances. The gaming operations of GNLV and GNL are subject to the licensing and regulatory control of the Nevada Gaming Commission and the Nevada State Gaming Control Board. GNL’s operations are also subject to regulation by the Clark County Liquor and Gaming Licensing Board. GNLV’s operations are also subject to regulation by the City of Las Vegas. These agencies are referred to herein collectively as the Nevada Gaming Authorities.

Policy Concerns of Gaming Laws

The laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based upon declarations of public policy. These public policy concerns include, among other things:

·       preventing unsavory or unsuitable persons from being directly or indirectly involved with gaming at any time or in any capacity;

·       establishing and maintaining responsible accounting practices and procedures;

·       maintaining effective controls over the financial practices of licensees, including establishing minimum procedures for internal fiscal affairs, and safeguarding assets and revenue, providing reliable recordkeeping and requiring the filing of periodic reports with the Nevada Gaming Authorities;

·       preventing cheating and fraudulent practices; and

·       providing a source of state and local revenue through taxation and licensing fees.

Changes in these laws, regulations and procedures could have significant negative effects on our gaming operations and our financial condition and results of operations.

Owner and Operator Licensing Requirements

GNLV and GNL are licensed by the Nevada Gaming Authorities as corporate licensees, which we refer to herein as company licensees. Under their gaming licenses, GNLV and GNL are required to pay periodic fees and taxes. The gaming licenses are not transferable.

To date, the Golden Nugget properties have obtained all gaming licenses necessary for the operation of their existing gaming operations; however, gaming licenses and related approvals are privileges under Nevada law, and we cannot assure you that any new gaming license or related approvals that may be required in the future will be granted, or that any existing gaming licenses or related approvals will not be limited, conditioned, suspended or revoked or will be renewed.

Company Registration Requirements

Poster Financial has been found suitable by the Nevada Gaming Commission to own the stock of GNLV and GNL and has been registered by the Nevada Gaming Commission as a holding company. PB Gaming has been found suitable by the Nevada Gaming Commission to own the stock of Poster Financial and has been registered by the Nevada Gaming Commission as a holding company. Poster

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Financial is also registered with the Nevada Gaming Commission as a publicly traded corporation, which we refer to herein as a registered company, for the purposes of the Nevada Gaming Control Act.

Periodically, we will be required to submit detailed financial and operating reports to the Nevada Gaming Commission and to provide any other information that the Nevada Gaming Commission may require. Substantially all of our material loans, leases, sales of securities and similar financing transactions must be reported to, or approved by, the Nevada Gaming Commission.

Individual Licensing Requirements

No person may become a stockholder or member of, or receive any percentage of the profits of, a non-publicly traded holding or intermediary company or company licensee without first obtaining licenses and approvals from the Nevada Gaming Authorities. The Nevada Gaming Authorities may investigate any individual who has a material relationship to or material involvement with us to determine whether the individual is suitable or should be licensed as a business associate of a gaming licensee. Timothy N. Poster and Thomas C. Breitling (the “Shareholders”) have been licensed or found suitable by the Nevada Gaming Authorities as officers and directors of Poster Financial, PB Gaming, GNLV and GNL and as stockholders of PB Gaming for a four year period. During the four-year period in which the findings of suitability and licenses are in effect, the Shareholders may apply for new unlimited findings of suitability and licenses. No assurance can be given that such applications would be granted without further limitation or at all. If the Shareholders were found unsuitable, they would be required to be removed from their positions as officers and directors and PB Gaming could be required to redeem the stock in PB Gaming held by them at a price equal to fair market value. Such an event could result in the liquidation of PB Gaming and the Company.

The other officers of GNLV and GNL are required to, and the other directors of Poster Financial and key employees of GNLV and GNL may also be required to, file such applications. The Nevada Gaming Authorities may deny an application for licensing for any cause which they deem reasonable. A finding of suitability is comparable to licensing, and both require submission of detailed personal and financial information followed by a thorough investigation. An applicant for licensing or an applicant for a finding of suitability must pay or must cause to be paid all the costs of the investigation. Changes in licensed positions must be reported to the Nevada Gaming Authorities and, in addition to their authority to deny an application for a finding of suitability or licensing, the Nevada Gaming Authorities have the jurisdiction to disapprove a change in a corporate position.

If the Nevada Gaming Authorities were to find an officer, director or key employee unsuitable for licensing or unsuitable to continue having a relationship with us, we would have to sever all relationships with that person. In addition, the Nevada Gaming Commission may require us to terminate the employment of any person who refuses to file appropriate applications. Determinations of suitability or questions pertaining to licensing are not subject to judicial review in Nevada.

Consequences of Violating Gaming Laws

If the Nevada Gaming Commission decides that we have violated the Nevada Gaming Control Act or any of its regulations, it could limit, condition, suspend or revoke our registrations and gaming licenses. In addition, we and the persons involved could be subject to substantial fines for each separate violation of the Nevada Gaming Control Act, or of the regulations of the Nevada Gaming Commission, at the discretion of the Nevada Gaming Commission. Further, the Nevada Gaming Commission could appoint a supervisor to conduct the operations of GNLV and GNL and, under specified circumstances, earnings generated during the supervisor’s appointment (except for the reasonable rental value of the premises) could be forfeited to the State of Nevada. Limitation, conditioning or suspension of any of our gaming licenses and the appointment of a supervisor could, and revocation of any gaming license would, have a significant negative effect on our gaming operations.

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ITEM 2.                PROPERTIES

The Golden Nugget—Las Vegas occupies approximately seven and one-half acres and GNLV owns the buildings and approximately 90% of the land. GNLV leases the remaining land under three ground leases that expire (giving effect to their options to renew) on dates ranging from 2025 to 2046. The Golden Nugget—Laughlin occupies approximately 13.5 acres, all of which is owned by GNL.

ITEM 3.                LEGAL PROCEEDINGS

Poster Financial is not involved in any litigation. GNLV and GNL are each defendants in various lawsuits, most of which relate to routine matters incidental to the Company’s business. We do not believe that the outcome of this pending litigation, considered in the aggregate, will have a material adverse effect on our business, financial condition, results of operations or liquidity.

ITEM 4.                SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

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PART II

ITEM 5.                MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Poster Financial’s only class of common equity is its common stock, no par value per share, for which there is no established public trading market. As of March 31, 2005, all 100 issued and outstanding shares of Poster Financial’s common Stock were held by PB Gaming. On June 21, 2004, the Poster Financial paid a cash dividend equaling $1,118,000 to PB Gaming.

The Credit Facility and the indenture governing our Senior Notes each contain restrictions on our ability to pay dividends or make distributions to our stockholders.

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ITEM 6.                SELECTED FINANCIAL DATA

													Golden Nugget Group (a division of):
		Poster Financial Group, Inc.											Mirage Resorts, Incorporated					MGM MIRAGE
		Period from Inception (June 2, 2003) to December 31,					Year Ended December 31,						Jan. 1 - May 31,					June 1 - Dec. 31,			Year Ended December 31,									Period from Jan 1, 2004 through
		2003					2004						2000					2000			2001			2002			2003			Jan .22, 2204
		(dollars in thousands)
Revenues
Casino			$	—				$	128,296					$	48,568			$	62,754		$	110,260		$	110,885		$	121,601			$	7,890
Rooms			—					44,259						17,991				23,912			40,109			38,992			41,647				2,610
Food and beverage			—					43,746						13,995				19,344			34,067			35,871			38,769				2,491
Entertainment, retail and other			—					11,561						4,429				6,182			13,181			14,135			12,422				711
Gross revenues			—					227,862						84,983				112,192			197,617			199,883			214,439				13,702
Promotional allowances			—					(29,240		)				(8,684		)		(11,994		)	(21,375		)	(23,154		)	(24,777		)		(1,535		)
Net revenues			—					198,622						76,299				100,198			176,242			176,729			189,662				12,167
Costs and expenses
Casino			—					82,105						23,738				31,896			59,787			64,362			67,340				4,144
Rooms			—					18,774						8,281				12,119			17,214			17,437			19,184				1,202
Food and beverage			—					26,461						11,886				16,441			27,033			26,463			26,852				1,749
Entertainment retail and other			—					9,204						3,184				4,358			10,012			11,396			9,331				506
Provision for doubtful accounts			—					2,434						181				375			546			659			1,084				108
General and administrative			383					39,573						11,747				17,262			29,175			31,028			33,440				1,939
Restructuring costs(1)			—					—						8,972				—			1,893			—			—				—
Impairment charges(1)			—					—						1,334				—			305			—			—				—
(Gain) loss on sale of assets			—					(50		)				(27		)		(31		)	(196		)	(31		)	(39		)		—
Depreciation and amortization			—					14,311						6,086				8,299			12,901			12,169			12,731				782
Management fee(2)			—					—						4,361				5,801			9,975			10,013			10,718				685
Total costs and expenses			383					192,812						79,743				96,520			168,645			173,496			180,641				11,115
Operating income (loss)			(383		)			5,810						(3,444		)		3,678			7,597			3,233			9,021				1,052
Other income (expense)
Equity in loss of joint venture			—					(458		)				(647		)		(906		)	(929		)	(864		)	(771		)		(26		)
Interest income			65					117						115				159			152			66			34				2
Interest expense			(1,161		)			(16,763		)				(35		)		(44		)	(68		)	(60		)	(52		)		(3		)
Intercompany interest expense			—					—						(3,037		)		(4,594		)	(6,356		)	(3,958		)	(3,361		)		(206		)
Total other expense			(1,096		)			(17,104		)				(3,604		)		(5,385		)	(7,201		)	(4,816		)	(4,150		)		(233		)
Income (loss) from continuing operations before income taxes			(1,479		)			(11,294		)				(7,048		)		(1,707		)	396			(1,583		)	4,871				819
Income tax (provision) benefit			—					—						2,561				660			(37		)	702			(1,589		)		(258		)
Income (loss) from continuing operations			(1,479		)			(11,294		)				(4,487		)		(1,047		)	359			(881		)	3,282				561
Discontinued Operations
Income (loss) from discontinued operations before income taxes			—					2,098						1,227				(948		)	(1,046		)	497			(622		)		155
Income tax (provision) benefit			—					—						(443		)		369			477			(145		)	251				(48		)
Income (loss) from discontinued operations(3)			—					2,098						784				(579		)	(569		)	352			(371		)		107
Net income (loss)			$	(1,479	)			$	(9,196	)				$	(3,703	)		$	(1,626	)	$	(210	)	$	(529	)	$	2,911			$	668
Other data:
EBITDA(4)			$	(318	)			$	23,363					$	5,030			$	12,045		$	20,733		$	16,843		$	21,577			$	2,017
Net cash provided by operating activities			104					5,876						7,185				8,718			16,429			13,921			19,202				5,012
Net cash used in investing activities			(159,578		)			(56,479		)				(2,237		)		(3,682		)	(13,424		)	(21,331		)	(8,419		)		(4,671		)
Net cash provided by (used in) financing activities			159,474					74,722						(4,551		)		(3,206		)	(6,332		)	7,051			(4,219		)		(8,452		)
Capital expenditures(7)			30					14,757						1,922				3,302			12,776			20,610			7,390				4,436
Ratio of earnings to fixed charges(5)			—					0.47		x				—				1.74		x	1.04		x	—			2.34		x		5.4		x

 

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		Poster Financial							Golden Nugget Group (a division of):
		As of December 31,							MGM MIRAGE As of December 31,
		2003			2004(3)				2000			2001			2002			2003
		(dollars in thousands)
Balance Sheet data:
Cash and cash equivalents		$	—		$	15,321			$	21,026		$	17,699		$	17,340		$	23,904
Restricted cash, in escrow		159,548			—				—			—			—			—
Total assets		173,554			277,174				233,056			219,655			223,133			221,974
Amounts payable to MGM MIRAGE and affiliates, net		—			—				119,391			106,529			112,467			102,084
Total debt, including current maturities(6)		155,000			191,427				80,785			80,693			80,600			80,500
Stockholder’s equity (Division equity)(8)		9,404			38,207				5,683			5,473			4,944			7,855
Net assets held for sale		—			43,076				—			—			—			—

(1)     The Golden Nugget Group was previously a subsidiary of Mirage Resorts, Inc. Mirage Resorts was acquired by MGM Grand, Inc. on May 31, 2000 (the “Mirage Acquisition”) and the combined company changed its name to MGM MIRAGE. During the first quarter of 2000, the Golden Nugget Group recognized restructuring costs of approximately $9.0 million and impairment charges of approximately $1.3 million in connection with the Mirage Acquisition.,.

During the third quarter of 2001, management of MGM MIRAGE responded to a decline in business volumes caused by the September 11, 2001 terrorist attacks. MGM MIRAGE implemented cost containment strategies that included a significant reduction in payroll and refocusing of marketing programs, including at the casinos operated by the Golden Nugget Group. A $0.3 million restructuring charge against earnings, primarily related to the accrual of severance pay, extended health care coverage and other related costs was recorded in connection with personnel reductions. All costs relating to the restructuring were paid out to terminated personnel by December 31, 2001.

In the third quarter of 2001, MGM MIRAGE reassessed the carrying value of certain assets, and the Golden Nugget Group recognized an impairment charge of $1.9 million. The charge relates to assets of the Golden Nugget Group that were abandoned in response to the September 11, 2001 terrorist attacks, primarily in-progress construction projects which management terminated after the attacks.

(2)     Prior to the acquisition by Poster Financial, the Golden Nugget Group was charged a management fee of 5.0% of gross revenues by MGM MIRAGE and its affiliates for executive, financial, SEC reporting, tax and similar services provided by MGM MIRAGE and its subsidiaries, collectively referred to as “corporate functions.” The fee also included the cost to the Golden Nugget Group of licensing the rights to use trademarks owned by MGM MIRAGE and its subsidiaries, including the “Golden Nugget” name and logo. Each of the Golden Nugget Group’s properties has a chief operating officer and key financial, accounting and marketing personnel, and the properties share an in-house legal function. Management has determined a representative annual cost for replacing the corporate functions previously provided by MGM MIRAGE and its subsidiaries of approximately $1.3 million based on staffing and other departmental costs for those positions that are incremental to these property level personnel. Such amount also includes an estimated allocation of actual, historical costs for external audit and financial reporting, regulatory oversight and compliance, and similar functions that are necessary to present the Golden Nugget Group as a stand-alone business. In connection with the Acquisition (see Note 3 to the consolidated financial statements of Poster Financial), Poster Financial acquired all rights to the Golden Nugget name and associated trademarks and is no longer subject to a licensing or royalty fee.

(3)     On November 8, 2004 we entered into a stock purchase agreement to sell the Golden Nugget—Laughlin and a separate agreement to sell the motel located in Bulhead City, Arizona, across the Colorado River from the Golden Nugget—Laughlin. The balance sheet data at December 31, 2004 reflects the assets and liabilities of Golden Nugget—Laughlin and the related hotel as net assets held for sale. Previously presented results of operations have been reclassified to reflect the results of the Golden Nugget—Laughlin and the related hotel in discontinued operations for all periods presented.

(4)     EBITDA consists of net income (loss) plus (i) interest expense, (ii) income tax provision (or less income tax benefit), and (iii) depreciation and amortization expense. EBITDA is presented as a measure of operating performance because we believe analysts, investors and others frequently use it in the evaluation of companies in our industry, in particular for the ability of a company to meet its debt service requirements and as a measure of liquidity. Other companies in our industry may calculate EBITDA differently, particularly as it relates to non-recurring, unusual items. Furthermore, funds depicted by EBITDA differ from amounts calculated under the definition of EBITDA used in our senior credit facility and in employment agreements that we have entered into with certain key employees. For example, the definition of EBITDA in the Credit Facility is further adjusted for, among other things, extraordinary gains and interest income and is used to determine compliance with financial covenants.

EBITDA is not a measurement of financial performance or liquidity under GAAP and should not be considered as an alternative to cash flow from operating activities, as an alternative to net income or as an indication of operating performance or any other measure of performance derived in accordance with GAAP. In addition, EBITDA is not intended to be a measure of free cash flow for management’s discretionary use as the funds depicted by EBITDA may be required for, among other things, debt service, distributions to our stockholders and capital expenditures. Furthermore, the use of such funds may be limited by the terms of the indenture governing the Senior Notes, the Credit Facility and any other agreements that may, from time to time, govern our indebtedness.

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The following table provides a reconciliation of net income to EBITDA from continuing operations and overall EBITDA:

									Golden Nugget Group (a division of:)
		Poster Financial							Mirage Resorts, Incorporated					MGM MIRAGE
		Year Ended December 31,							Jan. 1 - May 31,					June 1 - Dec. 31,			Year Ended December 31,									Period From Jan. 1, 2004 through
		2003			2004				2000					2000			2001			2002			2003			Jan. 22, 2004
		(dollars in thousands)
Net income (loss)		$	(1,479	)	$	(11,294	)			$	(4,487	)		$	(1,047	)	$	359		$	(881	)	$	3,282			$	561
Interest expense		1,161			16,763					3,072				4,638			6,424			4,018			3,413				209
Income tax provision (benefit)		—			—					(2,561		)		(660		)	37			(702		)	1,589				258
Depreciation and amortization		—			14,311					6,086				8,299			12,901			12,169			12,732				782
Depreciation and amortization of FSE(9)		—			432					347				485			178			179			194				27
EBITDA from continuing operations		(318		)	20,212					2,457				11,715			19,899			14,783			21,210				1,837
EBITDA from discontinued operations		—			3,151					2,573				380			834			2,060			367				180
EBITDA		$	(318	)	$	23,363				$	5,030			$12,095			$20,733			$	16,843		$21,577				$2,017

 

(5)     For purposes of calculating this ratio, earnings consist of income (before income taxes and equity in loss of unconsolidated joint venture) plus fixed charges. Fixed charges consist of interest expense and the portion of rental expense representative of interest expense. There was no capitalized interest incurred or amortized in any of the periods presented. Earnings were insufficient to cover fixed charges by the following approximate amounts in the periods indicated: For Poster Financial for the period from inception (June 2, 2003) to December 31, 2003 ($1.5 million); For Golden Nugget Group for the period January 1, 2000 through May 31, 2000 ($5.4 million) and for the year ended December 31, 2002 ($0.2 million).

(6)     Total debt consists of the current and long-term portions of notes payable, including notes payable to related parties.

(7)     Capital expenditures for the year ended December 31, 2004 includes approximately $201.8 million for the purchase of the Golden Nugget Group from MGM Mirage, consisting of a net purchase price and acquisition expenses of $213.7 million less $11.9 million in cash acquired.

(8)     Stockholder’s equity reflects additional capital contribution from PB Gaming made in connection with the closing of the Acquisition.

(9)     Depreciation and amortization of FSE includes the Company’s proportionate share of the depreciation and amortization of our 17.65% interest in The Fremont Street Experience Limited Liability Company, which amount is included in the equity in loss of joint venture.

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ITEM 7.                MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The Company

We own and operate the Golden Nugget—Las Vegas and the Golden Nugget—Laughlin hotel casinos. The following table sets forth information about each of the Golden Nugget properties as of December 31, 2004:

Property				Slot Machines				Table Games				Casino Space (square feet)				Hotel Rooms
Golden Nugget—Las Vegas					1,315				56				35,000			1,907
Golden Nugget—Laughlin					984				21				32,000			300
Total					2,299				77				67,000			2,207

 

We believe that the Golden Nugget brand name is one of the most recognized in the gaming industry and we expect to continue to capitalize on the strong name recognition and high level of quality and value associated with it. We target out-of-town customers at both of our properties while also catering to the local customer base. We believe that the Golden Nugget—Las Vegas is the leading downtown destination for out-of-town customers. The property offers the same complement of services as our Las Vegas Strip competitors, but we believe that our customers prefer the boutique experience we offer and the downtown environment. We emphasize the property’s wide selection of amenities and provide a luxury room product and personalized services at an attractive value. At the Golden Nugget—Laughlin, we focus on providing a high level of customer service, a quality dining experience at an appealing value, a slot product with highly competitive pay tables and a superior player rewards program. As further discussed under the heading
“—Recent Developments,” November 8, 2004 we entered into an agreement to sell the Golden Nugget—Laughlin, and on February 4, 2005 we entered into an agreement to sell Poster Financial and Golden Nugget—Las Vegas.

We also have an investment in The Fremont Street Experience Limited Liability Company (“The Fremont Street Experience LLC”), the entity which owns and operates The Fremont Street Experience. The Fremont Street Experience is a unique entertainment attraction located in the center of downtown Las Vegas on Fremont Street, where the Golden Nugget—Las Vegas is located.

The Golden Nugget Group

The operations of the Golden Nugget Group consist of two hotel-casinos located in Las Vegas and Laughlin, Nevada, referred to in this Annual Report on Form 10-K as the Golden Nugget—Las Vegas and the Golden Nugget—Laughlin, respectively. Our business strategy is to create the best possible gaming and entertainment experience for our customers by providing a combination of comfortable and attractive surroundings with attentive service from friendly and experienced employees. In addition, the Golden Nugget properties offer a wide selection of high-quality amenities to complement their guests’ gaming experience.

Key gaming volume indicators are table game “drop” and slot machine “handle”. Table game drop and slot machine handle are casino industry specific terms that are used to identify the amount wagered by patrons at a casino table game or slot machine, respectively. The revenues of the Golden Nugget properties can also be affected by the percentage of gaming volume retained by them, indicated by “win” or “hold” percentages, which we cannot fully control. Hold is calculated by dividing the amount won by the casino by the amount wagered by patrons. Hold percentages vary based on the mix of games on the floor. In addition, while hold percentage is reasonably predictable over periods greater than twelve months, it

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can fluctuate significantly over shorter periods of time, such as a fiscal quarter, which can affect comparability between periods.

In the hotel operations of the Golden Nugget properties, key measures are occupancy rates (a volume indicator) and average daily room rate (“ADR,” a price indicator). Revenues of the Golden Nugget Group can also be affected by economic and other factors. Domestic leisure travel is dependent on the national economy and the level of consumers’ disposable income.

Recent Developments

Sale of Poster Financial

On February 4, 2005, PB Gaming entered into the Landry’s Purchase Agreement to sell Poster Financial to Houston, Texas-based Landry’s for approximately $140 million in cash, and an additional payment by Landry’s for certain working capital liabilities. Under the terms of the transaction, PB Gaming has agreed to sell all of the shares of Poster Financial to LSRI, a wholly owned subsidiary of Landry’s.

Pursuant to the terms of the Landry’s Purchase Agreement, LSRI deposited $25,000,000 into an escrow account with Chicago Title of Nevada, Inc., the escrow agent, as a non-refundable deposit, except as otherwise expressly provided in the purchase agreement. LSRI may terminate the Landry’s Purchase Agreement for any reason or no reason in its sole and absolute discretion.

Under the terms of the Landry’s Purchase Agreement, the Senior Notes will remain outstanding obligations of Poster Financial following the closing. The consummation of the sale will result in a change of control of Poster Financial under the indenture governing the Senior Notes and, as a result, Poster Financial will be required within 30 days of such change of control to commence an offer to purchase all outstanding Senior Notes for 101% of the aggregate principal amount of the Senior Notes, plus any accrued and unpaid interest. Under the terms of the Landry’s Purchase Agreement, amounts outstanding at closing under the Credit Facility will be paid off by Landry’s or Landry’s will seek consent from the lender under such facility for such amounts to remain outstanding.

It is anticipated that the transaction will close within the next twelve months, subject to customary closing conditions contained in the purchase agreement, including receipt of all necessary governmental, gaming and other regulatory approvals.

Sale of Golden Nugget—Laughlin

On November 8, 2004, Poster Financial entered into a stock purchase agreement to sell the Golden Nugget—Laughlin to Las Vegas-based gaming and real estate company, Barrick Gaming Corporation for $31 million, plus working capital at the closing of the transaction. The transaction includes a 24-month license agreement for the limited use of the Golden Nugget—Laughlin name and brand.

The transaction is subject to customary closing conditions contained in the stock purchase agreement, including receipt of all necessary regulatory and governmental approvals. Both parties anticipate the transaction to be completed during the second quarter of 2005.

On March 24, 2005, in connection with the sale of the Golden Nugget—Laughlin, we sold a motel formerly used by the Golden Nugget—Laughlin to an unrelated third party. The motel is located in Bullhead City, Arizona and occupies approximately two acres of land. Net proceeds from the sale were approximately $1.1 million and were used to pay down debt outstanding under the Credit Facility.

Results of Operations

Year 2004 Compared to Year 2003

Net revenues for the year ended December 31, 2004 amounted to $210.8 million, an increase of $21.1

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million, or 11.1%, over the year ended December 31, 2003. The significant increase in net revenues was attributable to an increase in gaming volumes, food and beverage volumes and menu prices and room occupancy and ADR for the year ended December 31, 2004 compared to the year ended December 31, 2003.

The following table presents detail of our net revenues:

		Golden Nugget—Las Vegas
		Year Ended December 31,
								Percentage
		2003			2004(1)			Change
		(In thousands)
Casino revenue, net:
Table games		$	37,831		$	46,114			21.9	%
Slots		80,586			86,726				7.6	%
Other		3,184			3,345				5.1	%
Casino revenue, net		121,601			136,185				12.0	%
Non-casino revenue:
Rooms		41,647			46,869				12.5	%
Food and beverage		38,769			46,238				19.3	%
Entertainment, retail and other		12,422			12,272				-1.2	%
Non-casino revenue		92,838			105,379				13.5	%
		214,439			241,564				12.6	%
Less: Promotional allowances		(24,777		)	(30,775		)		24.2	%
		$	189,662		$	210,789			11.1	%

(1)          The information presented reflects the results of operations for (i) the first 22 days of January 2004, while the Golden Nugget—Las Vegas was owned by MGM MIRAGE and (ii) the remainder of the year through December 31, 2004 while the Golden Nugget—Las Vegas was owned by Poster Financial. A discussion of our operations for those discrete periods in 2004 is not meaningful when compared to the year ended December 31, 2003. Accordingly, for purposes of “Managements’ Discussion and Analysis of Financial Condition and Results of Operations”, we have presented the year ended December 31, 2004 on a combined basis.

Casino Revenues

Casino revenues during the year ended December 31, 2004 totaled $136.2 million, an increase of $14.6 million over the year ended December 31, 2003. Slot machine revenues accounted for $80.6 million, or 59.2% of casino revenues, and table games revenues accounted for $37.8 million, or 27.8% of the casino revenues for the year ended December 31, 2004.

Average win per slot machine per day for the year ended December 31, 2004 increased by 9.1%, as compared to the year ended December 31, 2003. Slot machine handle increased 9.1%, and table game drop increased 58.9%, as compared to the year ended December 31, 2003. Win per table game increased 26.4% over the prior period. These increases reflect the success of the casino’s promotional events, additional casino marketing staff and changes to table limits and odds.

Non-Casino Revenues

Room revenues totaled $46.9 million, or 22.2% of net revenues, for the year ended December 31, 2004 compared to $41.6 million, or 21.9% of net revenues, for the year ended December 31, 2003. Hotel occupancy during the period was 97.0%, compared to 95.3% for the year ended December 31, 2003.

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Overall ADR increased 10.8% for the year ended December 31, 2004, as compared to the year ended December 31, 2003.

Food and beverage revenues for the year ended December 31, 2004 totaled $46.2 million, or 21.9% of net revenues, compared to $38.8 million, or 20.5% of net revenues, for the year ended December 31, 2003. Food covers increased 6.2% during the period and the average revenue per cover increased 11.6% compared to the year ended December 31, 2003.

Entertainment, retail and other revenues experienced a slight decrease from $12.4 million for the year ended December 31, 2003 to $12.3 million for the year ended December 31, 2004.

Promotional Allowances

Promotional allowances provided to gaming patrons for the year ended December 31, 2004 and 2003, totaled $30.8 million and $24.8 million, respectively, and are characterized in the financial statements as a reduction of gross revenues. The increase is consistent with the increase in gaming volumes and customer base as compared to the year ended December 31, 2003.

Operating Expenses

Casino operating expenses for the year ended December 31, 2004 (including the 22 days preceding the Acquisition for comparability purposes) totaled $86.2 million, or 63.3% of casino revenues, compared to $67.3 million, or 55.3% of casino revenues, for the year ended December 31, 2003. Casino operating expenses were primarily comprised of salaries, benefits, gaming taxes, and other operating expenses of the casinos. The increase of $18.9 million, or 28.1%, in casino operating expenses is due primarily to increases in marketing, payroll and event expenses, and gaming taxes associated with the increase in casino revenues.

General and administrative expenses for the year ended December 31, 2004(including the 22 days preceding the Acquisition for comparability purposes) were $40.7 million, or 19.3% of net revenues, compared to $33.4 million, or 17.6% of net revenues, for the year ended December 31, 2003. The increases in general and administrative expenses are attributed to costs for additional payroll and services as we transition from the MGM Mirage corporate services, as well as for signing bonuses paid upon Acquisition of the properties by Poster Financial Group, Inc.

Income from Operations

Operating income for the year ended December 31, 2004(including the 22 days preceding the Acquisition for comparability purposes) was $7.7 million, or 3.7% of combined net revenues, compared to $9.0 million, or 4.7% of net revenues, for the year ended December 31, 2003. The decrease in operating income is primarily due to increases in marketing and promotional expenses for the year ended December 31, 2004.

Income from Discontinued Operations

The Company recognized income from discontinued operations of $2.1 million for the year ended December 31, 2004(including the 22 days preceding the Acquisition for comparability purposes) and a loss from discontinued operations of $0.4 million for the year ended December 31, 2003. Discontinued operations reflect the results of the Company’s Golden Nugget—Laughlin operation, which is held for sale.

Other Income and Expense

Other income and expense in 2004 consists principally of interest expense on our Senior Secured Notes Payable and our Bank Credit Facility and the equity in the loss of our joint venture investment in

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The Fremont Street Experience LLC. Other income and expense in 2003 consists principally of interest expense on a note payable to MGM MIRAGE and of equity in the loss of the Experience.

Interest expense for Poster Financial for the year ended December 31, 2004 amounted to approximately $16.8 million compared to $1.2 million for the full year ended December 31, 2003. The interest in 2003 resulted from the issuance of $155.0 million principal amount of the Senior Notes on December 3, 2003. The Senior Notes were outstanding for the full year in 2004. The Company also incurred interest expense in 2004 from the $20.0 million term loan under the Credit Facility (drawn on January 22, 2004 at the closing of the Acquisition) and from borrowings under the revolving portion of the Credit Facility. In 2003, the Golden Nugget Group also incurred approximately $3.4 million of interest expense, primarily on notes payable by Golden Nugget—Las Vegas to MGM MIRAGE, in the principal amount of $80.0 million. In connection with the closing of the Acquisition, the Golden Nugget—Las Vegas was relieved of its obligations to repay the note payable to the MGM MIRAGE.

The Golden Nugget—Las Vegas accounts for its investment in The Fremont Street Experience LLC as a joint venture, using the equity method of accounting. The Golden Nugget—Las Vegas added to its investment through contributions of approximately $0.7 million for the year ended December 31, 2004 and $1.1 million for the year ended December 31, 2003, and its equity in the loss of The Fremont Street Experience LLC was approximately $0.5 million for the year ended December 31, 2004 and approximately $0.8 million for the year ended December 31, 2003, which losses were consistent with our expectations. The joint venture is primarily designed to increase visitation to downtown Las Vegas and it is expected to continue to incur losses each year. GNLV has a 17.65% interest in the loss of The Fremont Street Experience LLC, which ownership and participation rate was consistent throughout 2003 and 2004.

Year 2003 Compared to Year 2002

Net revenues for the year ended December 31, 2003 amounted to $189.7 million, an increase of $12.9 million, or 7.3%, over the year ended December 31, 2002. The significant increase in net revenues was primarily attributable to an increase in table game drop, slot machine handle and room occupancy for the year ended December 31, 2003 compared to the year ended December 31, 2002.

The following table presents detail of our net revenues:

		Golden Nugget—Las Vegas
		Year Ended December 31,
								Percentage
		2002			2003			Change
		(In thousands)
Casino revenue, net:
Table games		$	32,140		$	37,831			17.7	%
Slots		75,578			80,586				6.6	%
Other		3,167			3,184				0.5	%
Casino revenue, net		110,885			121,601				9.7	%
Non-casino revenue:
Rooms		38,992			41,647				6.8	%
Food and beverage		35,871			38,769				8.1	%
Entertainment, retail and other		14,135			12,422				-12.1	%
Non-casino revenue		88,998			92,838				4.3	%
		199,883			214,439				7.3	%
Less: Promotional allowances		(23,154		)	(24,777		)		7.0	%
		$	176,729		$	189,662			7.3	%

 

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